Q1 2022 Exact Sciences Corp Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by and welcome to the exact Sciences Corp, first quarter 2022 earnings call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time. Please press star followed by the number one on your telephone keypad. If you would like to withdraw your question again press Star one.
Yeah.
Megan Jones Senior director of Investor Relations you May begin your conference.
Thanks, Josh Thank you for joining us for exact Sciences' first quarter 2022 conference call on the call today are Kevin Conroy, the company's chairman and CEO and Jeff Elliott, Our Chief Financial Officer, and Chief operating Officer.
Cunningham, our chief commercial officer will also be available for questions.
That sciences issued a news release earlier this afternoon detailing our first quarter financial results.
The release and today's presentation are available on our website at exact sciences dotcom.
During today's call we will make forward looking statements based on current expectations. Our actual results may have material differences from such statements reconciliations to GAAP figures are available in our earnings press release and descriptions of the risks and uncertainties associated with exact sciences are included in our SEC filings.
So it can be accessed through our website I'll now turn the call over to Kevin.
The exact sciences mission is to eradicate cancer by making earlier detection a routine part of medical care.
The entire team at exact sciences helped us move towards achieving that mission with a strong start to 2022.
Highlights from the first quarter include testing more than 1 million people globally.
Growing revenue, 24%, excluding our COVID-19 testing.
Partnering with Katie correct, and an exciting new campaign to get more people screened with Cologuard.
Optimizing our sales force structure to reach primary care doctors more effectively and more efficiently.
<unk> a record number of patients to more effective cancer treatments with Oncotype Dx.
Generating evidence to support our next generation Cologuard and multi cancer early detection tests.
Focusing intently on prioritization and growing our company efficiently.
And beginning to integrate prevention genetics into our foundation Jeff.
Jeff Elliott will now review our financial results.
Thanks, Kevin Good afternoon, first quarter revenue was $487 million, an increase of 21% or 24%, excluding COVID-19 testing screening.
<unk> revenue was $307 million, an increase of 28%.
Excluding prevention genetics screening revenue was $297 million, an increase of 24% driven by Cologuard volume.
9000, new health care providers ordered cologuard during the quarter and nearly 273000 have ordered since launch.
It isn't oncology revenue was $153 million, an increase of 18% driven by Oncotype Dx breast volume.
Precision oncology included eight points from our Cheyenne acquisition, which annualized in April .
Colby testing revenue increased decreased 15% to $27 million in line with our expectations.
First quarter GAAP gross margin was 68% non-GAAP gross margin, which excludes amortization of acquired intangibles was 72%, we expect margins to gradually improve throughout the year as we absorbed the additional lab capacity brought online for Cologuard and Covid testing.
Sales and marketing expense was $232 million G&A expense was $170 million, including a $26 million gain related to the thrive acquisition.
R&D expense was $102 million.
Net loss was $181 million and adjusted EBITDA was a loss of $90 million.
We ended the quarter with cash and securities of $817 million and we have about $150 million available on our credit facility. Additionally, we are exploring other non dilutive asset backed financing options, we expect our quarterly cash used to be lower over the balance of the year and we're confident in being profitable in 2024, and an adjusted EBITDA basis.
Turning to guidance, we expect total revenue between 485 and $505 million during the second quarter and between $1 95, and two points or three $2 billion for the year.
We expect screening revenue between $3 35, and $345 million for the second quarter and between $1 35, and $1 $3 72 billion for the year.
This includes prevention genetics revenue of approximately $10 million during the second quarter and between 40% to $42 million for the year.
We expect precision oncology revenue between 145 and $150 million for the second quarter and between 595 and $610 million for the year.
We expect Covid testing revenue between five and $10 million for the second quarter and between $40 $50 million for the year we.
We saw modest improvement in sales force access during the quarter guidance assumes continued gradual improvement throughout the year.
As we said last quarter, we expect screening revenue to be more frontloaded than current consensus.
And precision oncology, we expect mid to high single digit percent growth in the U S and internationally.
We reduced our international growth expectations due to a delay in our Oncotype Dx breast launch in Japan.
This is related to requirements for our ordering and resulting in portal, which we expect to complete by year end I'll now turn the call back to Kevin.
Thanks, Jeff our sales and marketing teams are fueling cologuard growth by reaching more physicians and their staff in person redesigning territories to improve health care provider targets and reduce overlap after completing our co promotion agreement.
And creating urgency around the importance of screening through our mission to screen partnership with Katy Kirk.
These efforts are increasing cologuard adoption in the core 50 to 85 age group and they are supporting two of Cologuard biggest growth drivers. The <unk> 45 to 49 age group and the three year re screens.
Screening eligible people earlier, starting at age 45 in keeping them screened every three years will help address the staggering increase in colorectal cancer incidence in this age group.
When compared to a 65 year old keeping a 45 year olds screened until Theyre 85 provides twice as much lifetime Cologuard usage. Since Cologuard was made available we have invested heavily in our teams brand development IP systems and customer experience.
This provides a headstart in capturing eligible unscreened patients at every age and our goal is to make re screening for life automatic.
Our experienced team trusted Oncotype brand and strong evidence generation capabilities are supporting our core oncology business and creating new growth opportunities our precision oncology team tested a record number of patients with our Oncotype Dx breast test in the first quarter, providing life changing.
Formation to more than 40000 people, we're partnering with a leading breast cancer research institution to conduct a study using our oncotype dx breast and minimum residual disease tests.
The trial, which we plan to initiate in the coming weeks demonstrates our unique ability to predict recurrence and help patients navigate their breast cancer treatment.
Our our Oncotype Dx tests guides about 70% of U S patients diagnosed with HR positive <unk> negative breast cancer to the most effective treatment based on the risk of recurrence.
Knowing which patients are at the highest risk puts us in the best position to monitor them and detect recurrent cancer earlier.
We're in a breakthrough period for our pipeline as we generate evidence for the three largest patient impact opportunities in diagnostics.
In colorectal cancer screening, we've made great progress enrolling cases to power our prospective Blue C study and we remain on track to complete stool enrollment midyear, we expect boosted results to support FDA submissions for our next generation Cologuard and colon blood test and.
In multi cancer early detection, we presented data confirming our strong results using methylation and protein markers, which we'll discuss on the next slide.
We're also initiating studies for our minimum residual disease test with a large trial enrolling in colorectal cancer in a breast cancer study starting soon.
We expect to have validation data supporting our tumor informed approach by the end of the year.
We believe combining multiple classes of markers will provide the most accurate multi cancer tests for patients and we're building off the promising methylation and protein data presented at ACR.
Our markers detected 88% of cancers at 97% specificity across six cancer types, including five with no screening option available today.
We expect to have additional data later this year, combining methylation protein mutation and other marker classes will also present validation data and expect to begin enrolling our prospective FDA registrational trials shortly thereafter.
We recently agreed to acquire <unk> era diagnostics, an emerging leader in proteomics biomarker discovery located in Germany. This highly skilled team will deepen our protium profiling capabilities, helping uncover the best Biomarkers to include in our advanced cancer tests.
Our deep relationships with over 300000 health care providers and more than 9 million patients.
Put us in an ideal position to help detect cancer most cancers earlier before symptoms appear we have built the infrastructure and capabilities to support this large customer base.
We also offer multi cancer and hereditary testing to the same patient population as cologuard those relationships will deepen in primary care where cancer can be prevented.
When cancers detected will also have the data test and relationships to support the patient.
At every step of their treatment.
Look forward to providing updates on our progress throughout the year and we're now happy to take your questions.
Yes.
At this time I would like to remind everyone. If you'd like to ask a question. Please press star followed by the number one on your telephone keypad.
We ask that you please limit yourself to one question.
The first question comes from the lineup.
Brian Weinstein with William Blair. Your line is open.
Hey, guys can you hear me.
Yes.
Hey, guys I appreciate it.
I appreciate the question and I'm going to tell you upfront amount probably break the rule here and ask you to think so.
<unk>.
If we could get a question in on on the sales structure and the optimization that you are going on and give a little bit more detail about kind of how that's playing out and then second if I could.
Just wanted to ask the question on <unk>.
Blood based testing and screening for colon cancer.
With a lot of companies now going to be putting out data here.
As in others.
Wanted to get your updated thoughts on the opportunities and challenges that you see to that space.
Yeah.
And as that data starts to come out so salesforce structure and kind of how that's going and the impact to Olive Garden, then blood based sorry for sneaking too and thanks.
Jeff why don't you take that.
Why don't you start with the first one in Everett.
Follow up.
Hey, Brian it's Jeff.
So on the sales force I mean, I think you're starting to see it in the results. We are pleased with the results. The team delivered in Q1, notably we started to see incremental productivity out of this expanded sales team, which we're really pleased that when you dive into the numbers here.
A really strong quarter when it comes to re screens in 45 and area of their business that we are working to address is that 50 and over age group first time users and that's right, where the salesforce restructure that ever can fill in more detail.
Where the Salesforce is focused now making sure that that population, which is over 25 million people who need to be screened right. Now is educated on the benefits of Cologuard and there were reaching these physicians frequently so Eric maybe you can find more details on that yeah. Thanks, Geoff and Hello, Brian as Kevin said, we brought over a really experienced team.
<unk> of our Pfizer colleagues.
We brought over over 400, Pfizer colleagues towards the end of last year.
One of the good things we've done is we've integrated the Pfizer colleagues with our outstanding legacy exact sciences Salesforce. So now we're one exact team. So that's the first most important thing is we're now going to market as one aligned exact sales and marketing team. The other thing we've done is around the redesigning of the territories, creating a single point.
Of accountability is really important we now have reps that are aligned.
The sole rep in that geography, so they have accountability to drive their growth number and we measure that on a weekly monthly and quarterly basis.
And then lastly, as we're giving our representatives more deep.
Detailed targeting data they know where to go when they go and what to say through data.
So they are calling on the highest.
Opportunity Cologuard physician and like Jeff said the metrics in Q1 have been very very positive.
Total number of in person calls per Rep has increased.
Total number of healthcare providers that we've reached.
It has increased and then our orders per sales call.
<unk> increased in Q1, so the key is to continue to do this throughout the year and make improvement.
Bryan answering your second question about how we see the blood testing market above.
As you know we have our own blood testing program.
And.
At a high level here is the way you should think about the opportunity. So there is an opportunity for additional testing. The path. However is a rigorous one as the path was very rigorous for cologuard. So.
You should think about five different.
Elements to this the first is that we know that blood testing will be less accurate than cologuard and certainly less accurate than colonoscopy.
The second is that.
FDA approval.
Getting an equivalent claim to cologuard is probably going to be challenging for all of that those who are aspiring to enter.
Colon cancer screening market with a blood based test will get into those details.
Third.
The bar for guideline inclusion is high and there is no guarantee that blood tests will meet that bar.
Talk about that.
Our pricing is likely to be below $200.
And we'll talk about that as well and finally and maybe most importantly is there is going to be.
A challenge in getting physicians to order, a less sensitive or less accurate.
Test for colorectal screening.
Let's let's take these one at a time and if we could bring up.
A slide with.
Modeled comparison between Cologuard in a theoretical blood tests.
As you see here importantly.
Regulators guideline.
Groups and also physicians and patients will look at performance difference in tests at a high level of course overall cancer sensitivity is important when you drill down those 75% of the cancers and the ones that you screen for our stage, one and two cancers.
And we would expect stage one sensitivity to be approximately 70%.
Because there are so many more early stage cancers in a screening study like there were 45% of all the cancers found in the deep C study were stage, 175% were stage, one or two the overall cancer sensitivity.
Is likely we believe to be in the 80 to maybe 85% range.
Advanced at a normal or pre cancer sensitivity is very important for especially for guideline inclusion will get into that and specificity.
Sure.
Similar between.
We believe the two technologies with.
But overall the.
The performance difference is stark.
And.
The FDA and this gets to the second point is that the FDA historically does not like to see performance degradation with new technologies that are subject to a PMA or de Novo 500 10-K approval.
We've seen two examples of this in colon cancer screening in the recent past one is except in nine which is a blood based test.
With inferior performance.
For detecting cancer and precancerous polyps than Cologuard.
Panel meeting for that was at the same time.
Actually the day before the Cologuard test.
Eventually approved except to nine but they did it with a very with a limited label compared to Cologuard their label set it must be offered and refused to <unk>.
First patients must be offered and refused a range of other tests that were recommended by the main guideline group at that time.
The second example is the <unk>, which has.
Up 500, 10-K de novo clearance for screening, but only in instances.
When a colonoscopy can't be completed so those are two examples of where you have performance degradation and as a result of claim language was changed.
The Fda's view on this hasn't changed we don't think it will change and we think there is a role for blood based testing.
But marketing.
Test with inferior claim language is certainly going to be a challenge.
Next guideline inclusion so.
As you know I've been doing this for a long time and have been through the USPS TF process.
You have to love modeling, if you are going to dive into these details.
But if the USPS P up is the main guideline group and their guidelines are based on these rigorous statistical modeling approach that is largely dependent.
On advanced Adenoma detection first that's about 60% of all of the impact comes from advanced Adenoma detection, and then cancer sensitivity weighted towards earlier stage.
And.
This next slide shows that relative to Cologuard.
Our CRC blood test with a similar interval sits.
Tax <unk> up.
Detects significantly fewer cancers and pre cancers.
And thus leads to a significant degradation in life years gained.
It holds the number of colonoscopy.
Constant.
Or roughly constant and that ratio is important but as you can see there the ratio of like years gained to the number of colonoscopy, which is the main test the USPS TF looks at.
Is significantly lower for a blood test at three years. So the only way of blood test really gets into guidelines is if its an annual test and let me take a step back. This modeling assumes 100% adherence that means everybody offers offer the test gets it.
They get it exactly when they should get it we know that's not realistic, but that's the way the modeling is done.
And that's why the fit test outperforms Cologuard here is because it assumes that a fit test is done every single year exactly on the anniversary, we know thats not remotely realistic, but that's how you end up in the same ballpark as you can see the fit test Cologuard colonoscopy all outperformed.
A blood test even with this pretty decent.
Performance of.
Relatively high cancer detection.
So.
Yes.
The test is not included in the guidelines of three years with sure it wouldn't be than it would have to be every year now what is the implication of that Medicare is going to look at this as they look at pricing that test. So you can think Cologuard every three years was priced just under one third of the Medicare.
Sure.
Average four.
Colonoscopy screening, which was indicated for 10 years. So 10 divided by three roughly got you to $500 a test.
500 divided by three we believe gets you into somewhere between $100 and $200 a test that makes us very challenging with with sequencing technology or for that matter, even Pcr testing.
Finally.
They are.
Performance difference guideline challenges FDA challenges also creates hurdles.
For customer adoption now we have been actively promoting cologuard to primary care physicians for eight years, we know this market well, even with a large commercial organization and.
A large marketing effort there is still a bias towards colonoscopy.
And we obviously and based on this last quarter or are showing our progress there, but that is with sensitivity for cancer strong pre cancer and specificity data, we believe that our blood tests will be very challenged.
<unk> and.
And we believe our blood test will perform very similar to others based on the data that we've seen today, but this is going to be a real challenge.
Get adoption, we believe this is the right way.
Look there is the realistic way to look at blood cancer testing, we hear a lot about it.
It's usually only small pieces of this complex puzzle. This is the whole puzzle.
Yes.
Your next question comes from the line of Derik de Bruin with Bank of America. Your line is open.
Hey, good afternoon. Thank you Hey, just.
Just help me understand this I mean, you beat the high end of your screening guide in Q1.
By roughly $3 million and yet you are lowering the high end of the range on screening for the full year by $5 million I'm, just curious, what's driving that kind of a follow up.
We are raising and narrowing the range share.
The press release, there, but we're pleased with first quarter results Cologuard grew 24%.
Really across the board broad based strength importantly here the main drivers Cologuard re screens very good quarter on track for the full year guide.
45% to 49, another very good quarter and are on track for the full year guide Salesforce productivity is ever talked about we're seeing improvement there. So.
So we're feeling good that which is why we did raise the guide even though it's only one quarter and that said it is one quarter and when you look at when you dig into the business as we've said before Salesforce access remains muted and where you see that primarily is in the 50 and over age group first time users.
That group is growing and we have seen improvement there it isn't growing as fast as we'd like which is why again why Everton TMR.
Pursuing some changes to go after that group.
As we go through the year and we see improving sales force access that should help that group drove even faster. So at this point are assumed gradual improvement to the extent that things open up more broadly that could be a source of even greater growth. We know over time that segment of the market will open back up but.
So just sitting here after one quarter I think this is the right thing to do raising guidance.
Not by the full amount of the Q1 beat.
Great.
Thanks for that.
I'm just curious.
Taking a tumor informed approach on Mardi.
I'm just curious.
On your thoughts on the tumor naive I'm, particularly since you've got the thrive multi cancer detection test I mean, why can't why wouldn't it make more sense as or light backward integrate that and.
Sort of use that since obviously youre going to have different <unk>.
For <unk>, it's going to be different easier sensitivities are aligned with that is there something is there something about the multi cancer tests wouldn't let you do it.
For <unk> <unk>.
As we have mentioned in the past on past calls, we intend to take a twofold approach so that we will combine.
Potentially all or elements of our multi cancer screening approach and particularly the methylation aspect.
And combine it with our tumor informed approach to be the only company that has both.
We believe that confers a significant advantage.
In those cases, where.
Physician can't get tissue from a patient or chooses not to get tissue, we will have.
Our tumor naive approach.
Based upon and driven by technology that is included so your question is spot.
Spot on.
And that technology is being built into our <unk> test.
Testing, we're really excited about this approach now lots of work needs to be done to validate that approach. So we don't want to get too far ahead of ourselves, but the fundamental technology investments. We've made will pay off we believe.
Okay.
Your next question comes from the line of Catherine Schulte with Baird. Your line is open.
Hey, guys. Thanks for the questions I guess first.
First how would you characterize as Boston wellness visit volumes versus pre COVID-19 levels in the quarter and then how did those trends so far in April .
Yeah. Thanks, Catherine we are still not from an access standpoint at pre COVID-19 levels.
What we've seen.
As I've spent time in the field I spent time talking to my commercial colleagues, we see modest improvement in access.
What we feel really good about is the redesigning of our territories.
And the culture, we are having our reps then everyday out in the field.
So as we see that access seeing that modest improvement, we're going to be there consistently to get in what I've seen I've spent time in the field as well.
When our reps bring value to the physician and to the health system.
And the health system and physicians see us as a way that we can increase screening levels.
We get access and so we just have to continue to stay at it it's about blocking and tackling and it's about being consistent with a really good message to our customers.
Your next question comes from the line of Brandon <unk> with Jefferies. Your line is open.
Hey, thanks.
Afternoon.
Yes, the leverage on the sales and marketing line in the first quarter was pretty impressive down I think $15 million or so sequentially. If you exclude the Pfizer <unk>.
In the fourth quarter, even though volume growth was up sequentially can you just talk about kind of moving parts in that line that enabling you to get that leverage.
Should we assume that your opex guidance for the year is consistent with your prior outlook unit, formerly update it.
Thanks, Brandon This is Jeff no change to the Opex assumptions for the year.
Feel good about our ability to generate leverage overtime, because now evident team that built a world class. We believe best of breed primary care sales team and.
And over time that not only can we leverage that with cologuard, but we'll continue to leverage that as we introduce other new products like hereditary cancer testing and multi cancer testing so I feel good about that.
Brennan I would go back and check some of the moving pieces, there Q to Q and the fourth quarter, we did have.
Yes, we amended the Pfizer agreement there were some onetime things in there but.
But I don't think the Matthew is quite right over the balance of this year I think we will see some really good leverage on that line.
If you look at what we had implied in the guide originally for the year.
Was a step down from the Q4 run rate for the entire year. So I feel good about that.
The new marketing things that ever talked about Katie couric, and some new TV ads.
Really helping drive awareness that overtime, we will we will see a really good return on the investment.
Yes.
Your next question comes from the line of Matt <unk> with Goldman Sachs. Your line is open.
Hi, good afternoon, Thanks for taking my question.
It sounds like you've got pretty good momentum and re screenings and Cologuard 45 in Q1 and on the last call. You had mentioned you're baking in about $220 million in re screening revenues within this this year's full year guide and about 100 million for Cologuard 45.
Are those numbers still good to use if so.
Do you see additional upside just given the momentum you've seen in Q1 or if you adjusted those numbers.
Matt I still feel very good about those numbers is there a potential for upside when you look at the opportunity, let's take re screens to start with today, there's over 1 million people do right now for three year repeat testing.
Over time that number will grow and in fact, if you look as a percent of revenue is going to continue to grow I think in about three years. This will be a $500 million per year business for us, but what really excites me as CFO is that this is essentially recurring revenue is higher margin revenue and it keeps growing as a percentage of our mix.
On the $45 to 49 side, Kevin talked a bit in his prepared remarks about this if you look at the average value to exact of a typical 45 year old it's over twice as high in fact really closer to three times as high as somebody who is 65 or 70, because a 45 year old we could keep screened for 30 to 40 years. So the light.
Time value of that customer is significant.
What really gets me excited about the opportunity here between 45 and re screened they work hand in hand, and we're off to a really good start this year.
Your next question comes from the line of Dan <unk> with Stifel. Your line is open.
Good afternoon, guys. Thanks for the question Geoff just to push a little bit more on the outlook I think last quarter. The view is that the.
The market and the environment around Doc visits and wellness wouldn't necessarily normalize this year I'm just wondering if that's still how you would characterize the way that youre thinking about the full year is.
Is the assumption still that youre kind of at a.
Sub optimal level three quarters from now.
Yes, Dan that is your assumption as Everett said, we saw some modest improvement in sales rep access and why that's important is that cologuard is still a relatively new product.
And what we know is that.
Physicians are promotional responsive to respond to that face to face access from our sales force.
When you dive in deep and look at the order insurance here that group of doctors on the top line has talked about this in prior quarters. The doctors that represented the top 40% of orders before the pandemic that group is still down.
What's driving the growth is the doctors.
Bottom the ones that we historically didn't call on and hadn't ordered Cologuard frequently theyre growing that group was up 60% in Q1 versus the start of the pandemic. So as we come out of this and Salesforce access improves the <unk>.
Doctors at the top of their order rate.
We will recover these are the true believers, we're seeing some early good signs there Dr. <unk> at the bottom the exciting thing here is that that group of doctors, who again, we typically do not call on that group is accelerating quarter to quarter to quarter and so I believe we'll hold onto that what that means is a significant broadening and deepening.
The ordering base, so and guidance till I have to assume I have assumed continued muted access to doctors were still probably in the $50 to 60% range relative to before the pandemic from a wellness visit standpoint things are pretty flat. When you look during the quarter. So I've assumed modest improvement there.
But we're probably in the 85% range 85% of.
Pre COVID-19 levels.
Yes, if I could just add longer term outlook, which were all.
Obviously focused on as well.
Over the next five years about 30% of Gis are expected to retire now obviously some of those will be replenished with.
With new physicians.
But the trend is.
Towards fewer Gis not more that means a greater need to focus on higher value colonoscopy, rather than screening colonoscopy and this is happening just as the millennials start to hit the age of 45 and start screening.
And we know that today in the 45 to 49 population, we already lead colonoscopy as the preferred screening approach.
<unk> accuracy.
Want.
And they want something that is inexpensive.
Inexpensive.
They know what's going to be covered by the insurer. So.
We are tremendously excited not only about the near term the long term opportunities for Cologuard. We're just getting started we believe we can not only achieve that 40% share goal, but exceed it.
And I think this quarter demonstrates that.
Your next question comes from the line of Dan Brennan with talent. Your line is open.
Yeah.
Great. Thanks.
Thanks for taking the questions, Kevin and Jeff and Robert I have a three parter if you don't mind.
I guess the first one is could you elaborate a bit on the specific changes to the sales force that you've made.
Number two on blood based competition, Kevin you gave your view of what you thought the cancer sensitivity would be what are your expectations for pre cancerous adenoma detection in particular given.
Given how important it is for modeling and then finally on your own blood based tests.
Quickly I believe you've talked about being superior to what's on the market.
Maybe just a subtle change, but I think you talked about being in line with what's on the market just wanted to get some clarification there.
Okay.
Yes.
Tell me. The first question those three came at me really feels pretty good for us okay.
Yeah, Dan Let me, let me double click on the sales force give it a little bit more color I'll start with the sales force.
The representative that are out there calling on physicians. The territory designed to me is is so important.
You have individual accountability in your area to drive growth for Cologuard and you are the ones that that's responsible for that position and really calling on physician.
To me what we've seen is as we've seen momentum with our sales reps because of that empowerment that they have to drive their individual growth, but let me go up a level. We also made a change to our management structure before our management structure was responsible for vertical lines of our business now we've designed our management structure.
Across geographies, so they own a geography and they own all the call points primary care specialty and health systems. So our managers out there feel like man. They are empowered to again on that business and to drive it and then lastly, the partnerships that we have with the rest of our commercial organization.
The way our sales organization is working with our marketing organization the.
The way in which Katy Kirk campaign is launched in the month of March during colorectal cancer awareness month.
The amount of hits from a social media standpoint.
Our commercial organization again, while it just started in the month of January the progress that we're making throughout the quarter is very very positive and I just want to pause and thank our sales team our marketing team for the focus that <unk> had in the quarter and also thank Katy Kirk for her partnership around the campaign around the mission to screen.
Part two of your question Dan.
The advanced adenoma or pre cancer sensitivity.
That we're assuming here is up 15%.
That's the modeling data that we showed was based upon 15% pre cancer detection.
It's interesting because if you model, 100% cancer sensitivity at a 100% specificity.
The model is borderline inclusion for on <unk>.
A one year basis for a blood test.
Again, if we had a 100% sensitive blood based tests.
100% specific under the USPS TF modeling approach.
It has a very difficult time with on the border line for making a one year interval it probably would make a one year interval, but it's on the border line.
In terms of our test performance relative to our.
Other aspiring entrants I think the way we've characterized that in the past is that we expect equivalent or better performance.
Because our tests.
Because of our approach.
We don't know how anybody is going for <unk>.
Reform I've seen studies out there with.
South Korean cases matched with U S controls we've never seen.
Certainly that's not the approach that we or our clinical partners would ever encourage us to take in a case control study. So we have seen.
All different approaches to case control study, it's hard to understand what their performance is.
Is going to be we know that we take a really rigorous approach to matching cases with controls and having.
Our normalized discharge distribution of.
Pre cancers early cancers, and later cancers, which also significantly affects that top line performance.
If there is going to be a day when everybody who is has these programs has to flip over a card and show their data and that data is going to be an interesting day I'm, telling you I think these the performance having been down this road before is going to suffer degradation in that.
<unk> setting where you have no idea.
What patients are involved and whether that matches your case control data. So that's our view on this space, we have said it over and over again.
We think that this is the right way to have a framework for assessing the role of a blood test.
Your next question comes from the line of Vijay Kumar with Evercore ISI. Your line is open.
Hey, guys congrats.
<unk> and thanks for taking my question.
I did have.
Etsy partner apologies in advance.
One.
Maybe on the guidance here.
The Q1 beat.
The annual guide range so cologuard.
<unk>.
The base Lasalle English raised by the magnitude of Q1.
So any reason why the pre.
The activity gains shouldnt sustain through the back half.
And again sticking with guidance Jeff here.
Last time, we spoke about the orders versus revenue lag.
Given omicron impact here in Q1 any.
Any implications for <unk> and one for Kevin here.
The clinical trial, Kevin maybe from a big picture perspective is there any.
In a clinical trial differences in how what patients for Angola. How these trials are being run when you look at your Blue C versus your main competitor on the blood side.
Why don't I start with that.
Clinical trials are done all over the country and we focus on ours.
Other than theirs.
What we are we're enrolling.
Enrolling a group of patients very similar to the deep C. Study. These are all comers people of.
Age 45 through 85 predominantly.
And.
With these large studies, it's a broad sampling of the U S population and what that means in impact in reality is that you get people who are sick their immune systems are all over the place. They are all different types of Comorbidities and what we saw in our deep C store.
<unk> was that that impacted specificity.
And when Youre specificity degrades sensitivity also.
Can be impacted depending on where you set that cutoff. So that's how we look at the clinical trial our enrollment.
We believe we'll be able to and this is important I don't think anybody's asked his question or Blue C. Clinical trial enrollment has had tremendous performance in the first quarter.
We expect that study to complete enrollment for the stool portion of our test by mid year and not long after that the blood components. So that is fully back on track and we're excited by that.
So Vijay this is Jeff I'll take the other two starting with your second one <unk>.
I think that was primarily a Q1 thing it happened relatively early late last year earlier this year.
We can track it fairly closely so I don't expect a second quarter impact from <unk>. The team did play through a little bit of a headwind in Q1 and still deliver good results.
On the first one on the annual raise.
Look I would just say again look we're pleased with the results we've raised guidance and to Derek's point, we did raise the high end of screening revenue by $5 million, even though it's early in the year. It's early in the year Theres a lot of unknowns. The biggest one is around sales force access salesforce access impact us impacts is primarily and that's <unk>.
50, plus first time user group so evident team are doing everything they can to.
To increase the productivity of the reps, we're seeing some early good signs there, but at this point in the I think it's important to stay silver.
Considering where three months ends and we still have some work to do to execute on the rest of the year.
Your next question comes from the line of Patrick Donnelly with Citi. Your line is open.
Hey, guys. Thanks for taking the questions.
Probably a couple for you here maybe on the cash side you guys burned I think around $200 million. This quarter. As you mentioned you have $800 million or so on hand, how should we think about the burn rate. This year is this a decent run rate and then what level would you look to shore up the balance sheet, maybe feeling more urgency on that front you've done equity raises in the past.
You mentioned, you would look more for non dilutive options.
Future can you just expand on that is that just market volatility what would those options look like and then a second one just on Cologuard Asps. If you could just talk about the trends there what you're seeing thank you.
Thanks, Patrick this is Jeff.
On the cash use rate I think Q1 will be the high watermark for the year I expect the average rate to step down throughout the year. There is some seasonal things that caused Q1 to typically be higher.
When I think over the next several years, but our balance sheet. It really starts with revenue and revenue growth we are a growth company.
So the focus is on making sure we execute on Cologuard and Oncotype and bringing these massive pipeline opportunities to market.
That will allow us to generate this year alone nearly $1 5 billion of gross profit. That's unique in this space that has a significant amount of gross profit. We can use to self finance most of our investments overtime nice gross margin improvement as we leverage that fixed cost investment in our lab and capabilities so that gross.
Margin will improve I also expect very good leverage across the Opex lines, we've talked a bit about sales and marketing expense.
We expect very strong leverage in G&A over time as well.
When you think of the balance sheet as of Q1 as you mentioned, we have over 800 million of cash.
We also have $150 million available on our credit facility that we could draw on anytime.
At the same time, we're looking at additional non dilutive financing sources is a prime example of that would be a real estate risks and facilities, we have over $300 million invested in those facilities that we can unlock through various sources sorts of financing mechanism. So and we will do that that provides a great source of non dilutive.
Financing so what I think of that I think we're in very good shape, we are very committed to being profitable for the full year on an adjusted EBITDA basis in 2024.
And I think the balance sheet, we have in hand will allow us to get there without using any sort of equity financing.
And then your last question was on Cologuard revenue per test.
It's still at about the $480 range Theres a few different things that are opposing forces at work here.
The team has done a really nice job of improving our internal capabilities and systems to drive that rate higher over time, so longer term I still feel very good about our ability to raise the overall revenue per test or ASP on the flipside. The rapid growth. We're seeing in this younger population, 45% to 49 temporarily puts a little bit of.
Downward pressure on that revenue per test. There's also been a higher mix of Medicaid, which is absolutely. The right thing to do that puts a little downward pressure. When you look at the overall mix of Medicare and Medicare advantage.
38% in Q1 for perspective, it was 42% a year ago Q1 of last year I raised that because that group right now given the well established coverage that group carries the highest revenue per test.
Let me reemphasize, what Jeff just said that.
We will not do another equity raise because we don't have to.
We are in a very strong position with our revenue growth and all that.
The drivers in our ability to control our opex.
We've taken steps to do so that is I want to make sure that that is very clear to everybody who listens to this call are rich this transcript.
Your next question comes from the line of Jack Meehan with Nephron Research. Your line is open.
Yeah.
Thanks, Good afternoon.
I wanted to focus on multi cancer testing first.
First for Kevin we've seen regulators like NCI last week focused on survival and mortality is the gold standard for multi cancer multi cancer tests.
So I was curious do you think the FDA is when you use that as the bar.
Can you talk about the implications for the size of your pivotal study and any updated thoughts on timeline for FDA approval and then for Jeff what was the gain related to thrive in the quarter. Thanks.
So the first question is what will the endpoints be.
Yeah.
How does NCI how to others look at this if it's a mortality endpoint.
That is a way of saying we don't want.
A blood based test that could have a greater impact on <unk>.
Cancer mortality then.
Most therapies combined there is no therapy as impactful as earlier detection.
So I've been part of many.
Conversations with key opinion leaders regulators.
The NCI.
Individuals that work for NCI and there are a lot of different opinions.
We know that with every cancer screening test that has been adopted colon cancer screening cervical cancer screening best breast cancer screening.
A mortality endpoint was not required I do not believe we do not believe that one will be required here.
We believe that sensitivity specificity and positive predictive value negative predictive value like with Cologuard like with the Pap smear like with HPV testing.
Like within prep.
Or will it will be the main thing that FDA looks at.
The guideline groups are surely going to look at.
<unk>.
You can look at our proxy endpoints, such such as a stage shift which occur sooner than mortality.
And so we think that this path.
Needs to be clarified.
But the power of the test and the number of high quality companies, who are act.
<unk> actively pursuing this opportunity.
We will lead the federal government.
And you can see this with the cancer moonshot to be very supportive of high quality clinical studies and tests.
That move the needle.
How is the FDA going to look at this I mentioned that already Jeff.
Yes, Hey, Jack on the gain related to thrive with this is is related to the acquisition. There are some earn out payments really tied to milestones of FDA approval and Medicare coverage.
And our expectations for timing have not changed at all for those the discount rate we used however.
Has changed given the increase in interest rates, so solely related to a different discount rate. It changed the current value of that the contingent payment, which resulted in a $26 million gain.
From an adjusted EBITDA standpoint, we do kind of exclude that so there's no impact on adjusted EBITDA.
Your next question comes from the line of Andrew Cooper with Raymond James Your line is open.
Hey, everybody. Thanks for the question a lot's been asked so maybe I'll I'll mix it up a little bit and give you something thats not precisely cologuard related.
So maybe just first if you could dive in a little bit skewed a little bit of a delay in the Japan launch for Oncotype.
What hurdles you need to cross to be able to get that launched and how it's maybe shifted a little bit.
And then secondly, I know it hasn't been too long that it's been in your hands, but any incremental thoughts initial thoughts on prevention and what's gone on in the <unk> AC.
Hcp's basin sustaining your hands would be great.
Well I'll take the high level, Japan question, Jeff you can talk maybe about the impact there.
There were requirement there are requirements on a order entry and resulting portal.
That are mandated by the Japanese Ministry of health.
We did not do as good of a job as we should have done in terms of delivering on that portal and all of the requirements associated with that.
The team is working very hard to.
To deliver exactly what the Ministry of health is asking for.
We're confident that that will be complete by.
The end of this year, we expected that to be complete in the first quarter. The difference is.
Jeff you can describe that.
The difference in timing there had an impact of about $15 million on the year.
We did not change guidance for precision oncology, because the base business. The U S business in international outside of Japan performed very well in the quarter and we expect that strong performance to continue but we did take out of.
Our internal expectations for the year any Japan revenue.
Question was on PG and thoughts on HCP, Yes. So prevention genetics team has really been amazing is such a high quality group focused on hereditary testing and our teams are working fast and furious too.
Very thoughtfully bring a complete a regulatory cancer testing solution.
To our customer base.
Both healthcare providers and patients.
We haven't provided a lot of color on exactly when that will launch with reimbursement other than.
Yeah.
The teams are working on making that as seamless solution.
Spec that is.
End of year, beginning of next year in terms of when we start to introduce that.
Your next question comes from the line of Mark Massaro with DTI.
Line is open.
Hey, guys. Thanks for taking the question.
Maybe on just M&A.
Recently, you've been doing some small tuck ins, notably this proteomics biomarker.
Provider in Germany.
But I wanted to sort of test.
Multiples in the space have contracted significantly and so some of the assets that may be available in the space would actually help you get to adjusted EBITDA sooner in my opinion for 2024, so looking at companies, where you could maybe strip out costs or leverage.
Your best in class of channel can you just speak about.
Any of your activities as it relates to doing larger M&A.
Well now that Twitter is off the table.
I will.
Our primary focus has been on Cologuard oncotype in our three key pipeline programs.
And in our philosophy on M&A hasn't changed if it's along if it contributes to our long term strategy of participating in helping patients and physicians.
All along that cancer continuum, it's a <unk>.
Good culture fit it creates shareholder value, we'll look at it we have.
Everybody on the team is hyper focused and that is the.
Model for 2022.
Prevention genetics added incredibly strong team and $40 million of profitable revenue.
Era.
Provides incredibly some of the worlds best protein.
<unk> and detection capabilities.
So that's our framework for looking at things and that Hasnt changed.
Your next question comes the line of Puneet <unk> with SBB Securities. Your line is open.
Yeah, Hi, Kevin and Jeff Thanks for taking the questions.
Don't have a three part of it just if I could ask just two simple ones.
First one on the Salesforce you were north of 1000 sales reps after the Pfizer additions since September so.
I'm wondering if you can provide us an exact count as part of this structuring and then just the second one maybe Kevin at a high level I just want to clarify I. Appreciate all the comments that you made on blood based assays.
Technology for exact sciences and for the diagnostic industry has continued to improve so.
When you look at drive cancer seek and methylation technology that <unk> been involved with those have continued to improve so do you think that CRC screening would be amenable to success in liquid biopsy at certain point or just not today, because obviously youre working towards technology and driving the success towards liquid.
<unk> multi cancer, obviously, so I just wanted to clarify that point do you think it's possible with blood one day or is it just that today's trials you don't think its possible that with the trials that are in the market right now thank you.
Good question. So the first question.
We're no longer going to provide clarity on the number of primary care sales reps.
We're in a position to do.
Do that we have an amazing team I will leave it.
At that and its large and its impactful.
On the second question, So I'll go back to.
The first meaningful meeting that I had as CEO of exact sciences with Bert Vogelstein at Johns Hopkins in 2009, and I walked into his office and Bert is a giant in the field and I said Bert.
No you were involved in the early part of exact sciences.
We think that a blood test makes more sense.
And he Bert said, you obviously haven't read my paper any referred me to a paper from a few years before and in that paper what they did is they went and they found.
Patients with stage one stage two stage three stage four cancer and also adenomas and within the tissue. They found a particular mutation.
And they use digital Pcr.
That could detect even one copy of.
Mutated DNA and.
And they were looking then in the blood with digital PCR for that patient's mutation, which they they knew was in tissue.
And what they showed was an exponential amount of DNA going from pre cancer, all the way to late stage cancer.
Hardly any DNA and I think what we're down to is that limit of detection.
That it's either a molecule is there or it's not there in many of those smaller tumors and certainly adenomas and so there is just this biological barrier that Youre limited to proteins help no doubt.
The World Hasnt found the magic bullet protein debt that is prevalent in blood.
And will that change it could at some point, but the biomarker class of methylation or the <unk> approach.
We have expertise in all of those areas and I wish there were a magic bullet.
There is not.
So.
I believe that the world hasn't changed a lot. We can provide the reference to that paper. If you call back I recently did a leadership connection.
Video conference with Bert for our leadership team and we had a conversation about that meeting we had years ago and I said Bert has anything substantially changed and the answer is yes technologies have gotten better more marker classes, but still here we are it's tough to detect.
Stage, one and two cancers in blood at the same level as you can and stool or with the colonoscopy are visually or otherwise.
Nothing has really changed there.
Okay.
There are no further questions at this time this does conclude today's conference call.
Dissipating you may now disconnect.
Please wait the conference will begin shortly.
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